Brazil’s recycling sector fights for tax breaks

recycling sector fights tax breaks
Photo: Joa Souza/Shutterstock

Brazil’s waste recycling sector is making a last-ditch attempt to avoid paying billions of Reais in backdated taxes, hoping to overturn a Supreme Court decision to scrap tax breaks for the segment.

In June of last year, the court declared the unconstitutional nature of two articles of a 2005 law regulating tax incentives for companies in research and development of technological innovation. The Supreme Court thus determined that credits from the PIS and Cofins taxes on turnover could be used to purchase recyclable materials and that, consequently, the sale of such materials was no longer tax exempt.

Recycling companies and organizations of individual waste pickers — known as catadores in Brazil — are requesting the ruling be reviewed. The rapporteur, Supreme Court Justice Gilmar Mendes, has rejected requests for another analysis, but suggests the validity of the ruling could be tweaked. He says the new interpretation should only be enforced from the date it was understood as such, i.e., June 16, 2021.

Without this time limit, companies selling recycled waste might have to cough up BRL 4.2 billion (USD 790 million) in outstanding taxes for the last five years, according to newspaper Valor Econômico.

Associations representing the sector argue that tax breaks encourage recycling and the purchase of recycled primary materials.

The Supreme Court trial was interrupted at the end of October by Justice Dias Toffoli, who asked to take the case under advisement. It is set to be picked up again before the end of the year.